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Cohesive or Corrosive? Why the Sharing Economy is Dividing Cities

Emma Clarence, Masterclass presenter at the upcoming URBACT City FESTIVAL, explores whether the Sharing Economy can impact upon urban inequalities.

In Seoul, Mayor Won Soon Park has hailed the sharing economy as a way of developing cohesive communities, meeting the needs of people and enriching their lives. Seoul’s ‘Sharing City’ agenda supports sharing economy businesses to create jobs, boost income and address environmental challenges.

In New York, Mayor Bill Di Blasio has criticised the corrosive impact of the sharing economy on jobs and communities, and the way in which some are left behind. New York City has repeatedly challenged sharing economy companies for the way they operate, including breaching regulations and attacking unionised labour.

These two divergent views highlight the contentiousness that surrounds the sharing economy, its impact and its potential. Is the sharing economy tackling inequality or creating it? And why is it proving so divisive?

But first, what is the sharing economy?

The sharing economy is the label used for businesses, organisations and community groups that realise the value of idling and underused assets. Companies like AirBnb and Uber have become the well-known face of the sharing economy. But there is a myriad of other activities being undertaken by for-profit companies and not-for-profit organisations alike that are all part of the sharing economy.

Car sharing clubs, lending tools, renting clothes/accessories, sharing a meal, crowd funding platforms, businesses swapping skills, maker spaces and Wikipedia, are all examples of the sharing economy. Each takes something that isn’t being fully used, such as time, skills or goods, and enables others to access it.

The potential of the sharing economy

Although many of the activities being done in the sharing economy are not new, what has driven its development is technology. The internet and smartphones enable people to find what they need and to connect to who has it easily. These connections between people are used to emphasise the way in which the sharing economy can improve cohesion by building trust between strangers.

There are other potential benefits to sharing. Limited resources and environmental degradation highlight the need to reduce consumption. Ride-sharing businesses, such as BlaBla Car, help reduce single passenger car journeys, and evidence from the USA has found that there has been a reduction in car ownership amongst members of car-sharing organisations. Re-use websites like Freecycle reduce waste by enabling people to pass on their unwanted items.

Positive claims have also been made about the impact on individuals and communities by sharing economy businesses. Companies such as AirBnB highlight that people use their platform to meet day-to-day living expenses with strong effects on local economies. Their research found that in Barcelona some 75 per cent of hosts were earning at or below the average household income. In the UK, AirBnB argued that it supported over 11,000 jobs and generated over £502 million in economic activity in 2012/2013.

How can sharing lead to inequality?

Sharing our resources can help address some of the big challenges communities confront. But it isn’t all positives. The issues are more nuanced than their presentation often allows.

For example, the rise of sharing holiday rental platforms is about more than individuals making ends meet. Communities are also affected. Concerns have been expressed in cities such as Barcelona, Berlin and New York on issues such as safety, the impact on local residents of a significant turnover of visitors, and the availability of affordable housing for permanent residents. Not all of these potential problems are insurmountable, but they highlight the complex issues that are emerging.

Promoting entrepreneurship and helping people to increase their income have also been highlighted as a benefit of the sharing economy. If you have a spare room you can rent it out, with a car you can offer a lift and with time you can take on odd jobs. Platforms like TaskRabbit match people with tasks and in March 2015 Uber announced that it would create one million jobs for women around the world. Other platforms allow people to ‘bid’ for work in their local area.

At a time when unemployment is a major issue for many cities the promise of such opportunities may be welcomed. But such work is often precarious, with inadequate hours and people may be treated as contractors rather than employees, leaving them with little protection. Some commentators have argued that the rise of the sharing economy has been driven by the impact of the financial crisis on the labour market and is fostering inequality, others just see it as part of a long-standing trend that has long-sought to transfer risks and costs away from business to individuals and governments. Such a picture of the sharing economy may only represent a small part of it, but if cities want to address inequality addressing low-pay and precarious work will be central to that, wherever it occurs.

Nor should we overlook the potential for the sharing economy to reinforce inequality. If the sharing economy is based on trust – what of long standing patterns of discrimination?

In 2014 research from Harvard University examined racial discrimination on an online platform. Drawing on New York City AirBnB hosts in 2012, the research found that after factors such as location were controlled for, non-Black hosts earned approximately 12 percent more than Black hosts in similar properties. The point is not about AirBnB but the way in which online reputation systems, crucial to the sharing economy, can effectively reinforce discriminatory practices and inequalities unless explicit steps are taken to address this possibility.

Building stronger communities through sharing

Unemployment, reductions in welfare and increases in the cost of living are not good arguments for the sharing economy. Some of these problems are not insurmountable, nevertheless they are problems to be recognised and addressed. So what of the promised strengths of the sharing economy? There are many examples where the sharing economy is building stronger, more cohesive communities, and supporting them to address the challenges they confront. Such examples are frequently smaller scale and less well-known but their impact is important.

In Bologna (Italy), the first Social Street was created with the idea of bringing people on the same street together: to socialise, to improve the area and to help each other by sharing what they had, whether it be time, goods or skills. From shopping for an older person to allowing someone without a washing machine to use one, Social Street has created a sense of neighbourliness in a place where previously many didn’t know their neighbours. Tackling isolation not only creates stronger communities, but by sharing resources Social Street has helped to ameliorate inequality.

An innovative approach to crowdsourcing ideas, and funds, can be found in Detroit Soup (USA). Each month people bring food to share and pay $5 to attend. They listen to four short presentations from people that want to do something that will have a positive impact on their community. At the end, people vote, with the winner receiving all of the funds raised from the evening. In five years Detroit Soup has raised $85,000 and supported 95 projects. Community development through crowdfunded micro-grants, accompanied by shared food, is an example of the sharing economy creating stronger communities, working together to address problems, including inequality.

What can cities do?

The sharing economy is contentious. Disrupting older industries, such as taxis and hotels, it has also been criticised for the impact it has on work, people and communities. But these criticisms ignore the way it is also building stronger, more resilient communities. Helping people to access what they need, to reduce waste, and to re-find the sense of community too often lost in cities, the positive opportunities of the sharing economy should not be ignored.

The sharing economy is evolving but cities cannot wait for it to mature before acting. In particular, cities need to address the regulatory and taxation issues that the ‘business end’ of the sharing economy has raised. Some cities have banned organisations, such as Uber, for using unregistered drivers. In others there have been fines for breaching local regulations (Barcelona), or new regulations developed to curtail the growth of certain parts of the sharing economy (Berlin). Other cities have worked with sharing economy businesses to find solutions to problems. For example, in Amsterdam, the city council and AirBnB agreed that they would work together to ensure that AirBnB hosts receive guidance on their responsibilities and the rules applicable to them, including a two-month a year limit on renting properties. At the same time, AirBnB will collect and pay the tourist tax to the Council.

However, it is not only in the area of regulation that cities need to act. Crucially, if cities want the sharing economy to contribute to addressing inequality and community cohesion they will need to think imaginatively about the way in which they use and support sharing economy organisations.

In 2014, Kirklees (in northern England) was one of the winners of the Bloomberg Mayor’s Challenge with the aim of revolutionising the way it works through the sharing economy. Although still in an early phase, the aim is to create a platform that brings together the public sector, businesses and the community to share ‘stuff, space, and skills’ through systems of borrowing, bartering and time banks. The focus of the project is on unleashing the potential that exists within Kirklees and strengthening the community, while maximising the resources available.

Cities are also committing to becoming ‘Sharing Cities’ helping to promote and build trust in the idea of the sharing economy. In Seoul, sharing economy businesses are supported and sharing services are vetted thereby helping to build trust in the idea. Public resources, from cars to buildings, are being made available to the public when they are not in use. And in Amsterdam, declared Europe’s first Sharing City in 2015, city leaders and officials, businesses and the community have come together to promote the sharing economy through a network of ambassadors and community stakeholders, as well as creating spaces for experimentation.

These sorts of actions help to address one of the key questions for the sharing economy: how can you participate if you don’t have assets? Enabling people to access public assets is an important step in creating opportunities for everyone to participate and cities have a central role to play in this.

This is just the beginning

We started with the two very different views of Mayors Park and di Blasio: the sharing economy creating cohesion or corroding communities. In reality, the division is not as stark and the picture is more complex and more nuanced.

Perhaps the contentiousness stems in part from the different types of activities currently labelled as ‘sharing’. Accessing something as a straight economic exchange doesn’t have to involve the social value that has been emphasised by sharing economy advocates. Hiring a car through a shared car club can be no different from renting it from a traditional rental company, but sharing your car with strangers in a ride-share is a very different proposition. There are still environmental benefits from both types of activities, but the potential for more cohesive, inclusive and resilient communities comes from creating links between people.

The sharing economy isn’t going away. Cities need to understand the diversity of activities that exist within it, and recognise that they have a role to play in supporting it to tackle issues, from the environment to inequality. They also have a role in limiting its potentially negative consequences through smart regulation.

The sharing economy isn’t standing still either. A decade ago, companies like AirBnB and Uber didn’t even exist. In a decade the types of companies that are part of the sharing economy may be very different. Already, sharing economy companies using cooperative and worker-owned models emerging. Cities cannot expect to develop policies and regulations once, but will need to work with the sharing economy as it evolves.

This is an ongoing dialogue and at the upcoming Urbact City Festival in Riga there will be an opportunity to examine some of the issues raised here in more depth, and explore the role of the sharing economy in addressing key issues cities confront and what cities can do to enable everyone to participate in its potential.

URBACT is a European exchange and learning programme promoting sustainable urban development.We enable CITIES to work together to develop solutions to major urban challenges, reaffirming the key role ther play in facing increasingly complex societal changes.